MONTVALE, N.J. — NYCE Corporation has filed a lawsuit against Concord EFS, Inc. alleging breach of an agreement between NYCE and current and predecessor operating entities of Concord, including Electronic Payment Services, Inc. (EPS) and Money Access Service Inc. (MAC).
In the complaint filed Jan. 22 in Superior Court of the State of New Jersey, NYCE charges that Concord has violated a 1993 agreement and engaged in other unlawful conduct as a result of certain operating rules it has adopted and is attempting to enforce.
According to the complaint, the rules generally require that point-of-sale transactions conducted with cards branded with NYCE and Star at POS terminals branded with both network logos be routed to Concord's Star network, even if the card issuer has designated that the transaction be routed to the NYCE network.
According to the complaint, the 1993 agreement obligates NYCE and the Concord entities to permit financial institutions that participate in both EFT networks to direct how POS transactions using their cards are routed. The agreement established a precedent for issuer designation and honoring of network priority routing.
The agreement also prohibited Concord, NYCE and their respective affiliates from adopting and imposing any operating rule that would unilaterally prevent the routing of POS debit transactions to the other network, thereby depriving their member financial institutions of the power to choose.
"Throughout its nearly 20-year history, NYCE has focused on the needs of its participating financial institutions by supporting fair market practices and issuer choice," said James Judd, NYCE's executive vice president. "Our 1993 agreement, which settled unfair competition litigation, created and was intended to maintain an open and flexible business environment for financial institutions that choose to participate in both the NYCE and Star-branded EFT networks."
For several years after Concord acquired MAC and EPS in 1998, Concord apparently followed the 1993 agreement. However, in early 2002, after acquiring the Star network in 2001, Concord adopted a Star policy requiring that a POS transaction conducted with a debit card bearing the Star brand at a POS terminal also bearing the Star brand be routed through the Star network.
In early 2003, Concord began sending letters to card issuing financial institutions and merchant processors advising them about the Star rule and threatening to assess fines against entities that did not comply with that rule.
Judd said, "We believe that networks can, and should, compete on factors such as economic value and product performance and that this competition should not be constrained. Concord is, in effect, legislating routing in the segment of the industry that is experiencing the most growth -- PIN debit purchases at the point of sale."
